(Bloomberg) -- Oil edged up as rising optimism around a demand recovery in regions such as the U.S. offset Covid-19 flare-ups in parts of Asia.
Futures in New York climbed as much as 1% on Monday, reversing earlier losses. The U.S. and China, along with parts of Europe, are rapidly recovering from the pandemic as vaccinations accelerate. In the U.S., passengers at airports jumped to the highest since the pandemic began. However, Indian fuel demand continued to weaken in the first half of May.
The oil market’s structure is showing signs of strength. The premium for global benchmark Brent’s nearest contract over the next one has started widening again in a bullish backwardation, signaling a tightening market.
Despite some concern around demand in parts of Asia, “in the U.S., Memorial Day is approaching and people are getting out,” said Bob Yawger, head of the futures division at Mizuho Securities.
Crude is up about 3.8% so far this month, held back by a tepid recovery in Asia, where the coronavirus is crippling key importer India, and Singapore and Taiwan grapple with new outbreaks. Another wildcard is the prospect of more crude flows from Iran as the nation seeks to revive a nuclear deal and free itself of U.S. sanctions. Talks are ongoing, however, and progress on a solution remains uncertain.
Meanwhile, the steady recovery in U.S. air travel continues. On Sunday, the number of people passing through Transportation Security Administration checkpoints at airports surged to 1.85 million, the highest since March 2020. United Airlines Holdings Inc. said it plans to operate 80% of its pre-pandemic U.S. schedule.
There were some additional reasons for physical markets to be tentatively optimistic. Last week, India’s biggest refiner was looking to buy crude for the first time in a month. Meanwhile, a unit of a giant Chinese refiner issued a purchase tender on Monday.
©2021 Bloomberg L.P.
